Facebook’s Sandberg Wooed by Hollande Seeking Startup Buzz

First Lady Michelle Obama, from back left, Francois Hollande, France's president, and President Barack Obama attend the official state dinner in Washington, D.C. on Feb. 11, 2014. Photographer: Pete Marovich/Bloomberg

Feb. 12 (Bloomberg) -- On the menu for the lunch French
President Francois Hollande is hosting today for the chiefs of
the likes of Google Inc. and Facebook Inc.: carrots and sticks.

In the first official trip by a French president to San
Francisco in 30 years, Hollande will seek to woo Facebook’s
Sheryl Sandberg, Google’s Eric Schmidt and Twitter Inc.’s Jack
Dorsey into investing more in France. He will also carry a
warning on taxes amid accusations of revenue diverted by Silicon
Valley’s largest players from France to Europe’s low-tax nations.

“There are issues to take on, like tax optimization and
privacy,” said Jean-David Chamboredon, the chairman of Paris-based ISAI Gestion SAS and the head of the entrepreneurs’ group,
The Pigeons. “But there’s also enthusiasm, speed and value
creation that one hopes will be contagious.”

Hollande’s balancing act during a seven-hour stop in the
Bay area on the last day of his U.S. state visit comes as he
confronts an economy at home that’s been at a near-standstill
since 2012, an unemployment rate that’s at a 16-year high and a
deficit still above the European threshold. With his popularity
at a record low, Hollande is hard pressed to fill the state’s
coffers and spur job creation by encouraging companies to invest.

Seeking a piece of the world of tweets, follows, likes and
snapchats, Hollande wants to show California’s entrepreneurs
that France is a “Start-up Republic,” according to a press kit
emailed by his office.

Business Friendly

Tax breaks for research and easy work permits for
scientists will be on display to make up for French tax-evasion
probes under way against companies such as Google and LinkedIn.

The 59-year-old Socialist President will also showcase his
new business-friendly self. He started the year unveiling
policies including a pledge to slash state spending and 30
billion euros ($41 billion) in cuts on charges paid by companies,
measures that have yet to be put in place.

“No risk, no gain, and no victory, no success,” Hollande,
who was at the helm of the Socialist Party for 12 years, told
entrepreneurs last month. “Risk is movement.”

Hollande’s new-found enthusiasm for business -- after he
once famously said he didn’t “like the rich,” and claimed
during his election campaign that finance was his “greatest
adversary” -- has drawn skepticism.

Tax Hunt

“The Pigeons,” the French entrepreneurs’ group, some of
whose members now live in the Bay area, are wary of his promises.

“The president will probably learn what it takes to create
a favorable environment to allow global leaders to emerge: speed,
capital, trust, all that’s made Silicon Valley so successful,”
Chamboredon said on Bloomberg Television.

Hollande’s lunch at a French restaurant in San Francisco
will also include Tony Fadell, the founder of Nest Labs Inc. and
a former Apple Inc. senior vice president, and Marc Benioff,
chief executive officer of San Francisco-based Salesforce.com.

Since his May 2012 election, Hollande has sought to block
large multinationals from doing what he calls “tax
optimization.” He has targeted Internet companies, whose
operations are often difficult to pin down.

“We must take action against these big corporations --
that we all know -- that are settling in low-corporate-tax
countries,” he said on Feb. 6 as he toured a French Internet
company near Paris.

Closing Loopholes

The French government has declined to name the companies
it’s investigating for dodging taxes and the size of the fines
they may face.

Sunday newspaper Journal du Dimanche reported a fine of
about 500 million euros for Google. Agence France-Presse said
Facebook and LinkedIn Corp. also face tax fines. France’s Budget
Ministry, in charge of the investigations, didn’t respond to
calls for comments.

Hollande says many multinational companies avoid paying
hundreds of millions of euros in value-added and corporate taxes
using loopholes in European Union laws and different tax regimes
across the region.

Some members of his government say France needs to tackle
the issue at a European level instead of going after the
companies.

“It’s all about European regulation,” French Foreign
Minister Laurent Fabius told RTL radio on Feb. 10. “We must
clean up our act at a European level.”

Ireland Base

The Organization for Economic Cooperation and Development
is expected to deliver the first set of guidelines of its plan
to combat base erosion and profit shifting by September for the
Group of 20 meeting.

While President Barack Obama may be Hollande’s ally in
confronting giant Internet companies shifting profits to avoid
corporate taxes, his administration wants to prevent U.S.
companies from being singled out by European regulators.

Many of these companies have registered their European
operations in Ireland, whose corporate tax of 12.5 percent is
less than half France’s 33.3 percent, one of Europe’s steepest.

Google -- 500 of whose 36,000 employees worldwide are in
Paris -- maintains its European headquarters in Ireland. From
there, it sells advertising across the region, including in
France. Apple, which has its European headquarters in Cork,
Ireland, sells most of the applications through its online App
Store. Facebook has its European base in Dublin.

Danielle Mitterrand

For Hollande, who hosted Google Chairman Schmidt for an
October 2012 sit-down about taxes, jobs and investments, the
Silicon Valley lunch will be yet another opportunity to find a
way to press home his point while showing he understands what
makes the entrepreneurial spirit in the valley work.

The last time a French president visited the Bay area, the
disconnect between France and the valley was all but apparent.

In 1984, when Socialist President Francois Mitterrand
visited California, all his “Cuba-admiring wife,” Danielle,
touring Apple’s factory with founder Steve Jobs, could talk
about was overtime pay and vacation for workers, missing the
technological revolution around her, according to Walter
Isaacson’s 2011 biography of Jobs.

“France needs to kick into the 21st century quickly and
Francois Hollande will get confirmation of that during his trip
to Silicon Valley,” said Chamboredon.